480. Cheatsheet
RM. The context and purpose of financial reporting | |
1. The context and purpose of financial reporting | |
| Define financial reporting | Process of recording, analysing, and summarising financial transactions for decision‑making |
| Types of business entity | Sole trader, partnership, limited liability company (LLC) |
| Legal differences between entities | Sole trader/partnership: unlimited liability LLC: separate legal entity, limited liability |
| Advantages/disadvantages of entities | Sole trader: simple but risky Partnership: shared skills but joint liability LLC: protection but regulation |
| Nature, principles, scope of financial reporting | Produces useful financial info for external users under standards |
2. Stakeholders’ needs | |
| Identify the users of financial statements and state and differentiate between their information needs. |
|
3. Financial statements | |
| Statement of financial position | Shows assets, liabilities, equity at a point in time |
| Statement of profit or loss | Shows performance over a period |
| Statement of changes in equity | Explains movements in equity |
| Statement of cash flows | Explains cash inflows and outflows |
| Asset | Resources controlled from past events generating future benefits |
| Liability | Present obligations from past events |
| Equity | Residual interest: assets − liabilities |
| Income | Increases in economic benefits |
| Expense | Decreases in economic benefits |
4. Regulatory framework | |
| Purpose of regulatory system | Ensure consistency, transparency, comparability |
| IFRS Foundation | Oversees standard-setting |
| International Accounting Standards Board (IASB) | Issues IFRS Accounting Standards |
| IFRS Advisory Council | Advises IASB |
| IFRS Interpretations Committee (IFRIC) | Interprets IFRS |
| International Sustainability Standards Board (ISSB) | Sustainability standards |
5. Duties and responsibilities of those charged with governance | |
| Define governance, in the context of the preparation of financial statements | System directing and controlling preparation of accounts |
| Duties and responsibilities of directors in the preparation of the financial statements | Prepare true and fair financial statements |
RN. Accounting principles, concepts and qualitative characteristics | |
1. Key principles and concepts of accounting | |
| Going concern | Assume business continues indefinitely |
| Accrual accounting | Record income/expenses when earned/incurred |
| Materiality | Ignore immaterial items |
| Offsetting | No netting unless permitted |
| Consistency | Same methods over time |
| Prudence | Caution under uncertainty |
| Duality | Every transaction has two effects |
| Business entity | Business separate from owner |
| Historical cost | Assets recorded at cost |
| Current value | Assets recorded at fair value |
| Substance over form | Economic reality > legal form |
2. Qualitative characteristics of useful financial information | |
| Relevance | |
| Faithful representation | |
| Comparability | |
| Verifiability | |
| Timeliness | |
| Understandability | |
RO. The use of double-entry bookkeeping and accounting systems | |
| Quotation | |
| Sales order | |
| Purchase order | |
| Goods received note | |
| Goods dispatched note | |
| Customer (sales) invoice | |
| Supplier (purchase) invoice | |
| Supplier statement | |
| Credit note | |
| Debit note | |
| Remittance advice | |
| Receipt | |
| Accounting equation | |
RP. Recording transactions and events | |
1. Sales and purchases | |
2. Cash | |
3. Inventories | |
4. Tangible non-current assets | |
5. Depreciation | |
6. Intangible non-current assets and amortisation | |
7. Accrued expenses (accruals), prepaid expenses (prepayments), accrued income, and deferred income | |
8. Receivables and payables | |
9. Provisions and contingencies | |
10. Capital structure and finance costs | |